While working, we often dream about retirement. But while watching a YouTube video by The Money Guy, I realized we fail to plan how we’ll spend our days. That’s not to downplay the national savings retirement crisis on our hands. But, we need to decide what we’ll do with all our time.
I’m 42 years old. By traditional retirement standards, I could be 23 years away from retirement. Depending on the day or year, I could be OK with that plan, or I could be frustrated that I’d have to wait 23 years to focus on me. Note that I had kids late, just before my 40th birthday. I suppose I was lucky to have twins, as people say, two and done, and all in one delivery. That said, it means that I’ll be in my late 50s when I send my kids to college. I won’t have much time alone with my husband, in my empty house, before a traditional retirement.
Right now, I’m in the thick of things with two 3-year-olds, a full-time job, this side gig, and a house to maintain. Now would be the time I could use some breathing room. Something I do to give myself a break is to use my vacation and personal days for random days off. Even if I have a doctor’s appointment or a car inspection, that still leaves most of the day for a nap, a walk, time to read in quiet, or time to work on my blog.
The point is, you don’t have to sacrifice today for time tomorrow. But you do have to have a plan. Here are a few options.
- Transition from 9-5 to -> Self Employed. Do you want to build a side business that will eventually become your full-time gig? That means you need a monetization plan and a timeline. You also need to consider future costs, many of which come when you leave a job with benefits:
- healthcare premiums
- dental insurance
- no retirement match
- Keep the 9-5. You like the stability and the benefits but need more time to rest, reflect, and pursue hobbies. Make better use of your paid time off to improve balance in your life.
- FIRE. FIRE = Financial Independence Retire Early. I believe this is slightly misrepresented by most people. By definition, retirement is when you stop working. Retirement is NOT when you quit your day job and run a side business that allows you the flexibility to travel more. That is self-employment or consulting.
Many people think they can leave their 9-to-5 job when their assets reach $1 million or more. Sure, you may live on a slim budget now. But will a standard 4% draw, ie $40,000 pre-tax — be enough for you? That’s $3,333 monthly before tax. Now that may be enough if all of your money is in a Roth IRA or Roth 401K. But here are a few life decision to consider, which could impact your future monthly cash flow needs.
- Do you plan to upgrade your home to have more space?
- Do you want to have or adopt children? What if you need infertility treatment? Does your state require health insurance to cover IVF?
- Will you get a dog or cat? That comes with regular costs + boarding or a pet sitter when you travel.
- When will you need a new car?
- How often do you want to travel?
- Will you have to help any family members financially or with personal support?
I raise these questions because even without a mortgage, a $40,000 annual budget won’t cover childcare costs. Now, you may or may not plan to have kids, and maybe by then you’d stay home with the kids and have no mortgage. But you still need to budget for health and auto insurance, groceries, heating, cooling, gas, diapers, a cell phone, and Internet.
Questions to ask yourself when considering FIRE, or leaving your 9-to-5 job early:
- Do you want to sacrifice all current comforts to be able to leave your job by 35 or 40? What will you do then?
- If you run your side gig, it’s not retirement. That’s fine, but be honest about it and plan for the social and financial changes.
- How will you socialize without workplace interactions?
- How will you structure your days?
- Do you have a list of trips you want to take and how much the travel will cost?
One day, I’d like this website to allow me to launch courses, sell advertisements, and benefit from affiliate marketing partnerships with trusted companies. My goal may be to eventually transition to entrepreneurship, and beyond that, to make my own schedule so I can work indefinitely. I’m not aiming for a gold watch, I’m aiming for personal and financial freedom, as long as I have my senses. Bottom Line: semi-retirement may be a better option for most Americans. It could help us stay active longer and remain fulfilled after we leave the traditional workplace.
*As always, this information is educational. Investment questions should be directed to a licensed CFP and tax questions should be directed to your CPA.*